Will Ethereum liquidity surpass Bitcoin?

Bitcoin performed strongly in August, but stablecoin market liquidity has not yet kept up.

Bitcoin achieved a monthly increase of more than 25% in August, showing its strongest monthly performance since November 2024. However, during the same period, the total value of the stablecoin market increased by only 0.5%, and failed to remain firmly above the US$310 billion level. This phenomenon shows that liquidity entering the cryptocurrency market has not yet formed a strong acceleration.

On-chain data also presents a similar situation. Although Bitcoin has rebounded by about 45% from recent lows, the 90-day cumulative open interest volume (CVD) remains neutral, indicating that spot demand has not yet been sufficiently strengthened. Liquidity within exchanges is also under pressure, with Binance's stablecoin reserves falling by about $7 billion from a cyclical high of $50 billion.

Hidden risks behind Bitcoin's rise

Although Bitcoin's technical aspects have turned bullish, liquidity and spot buying volume are still limited. At the same time, rising levels of Open interest indicate that speculative positions in the market are expanding. This situation makes it easy to trigger the risk of Long Squeeze when Bitcoin has strong resistance around US$80,000. The upcoming Federal Reserve's FOMC meeting is also an important macro event that could exacerbate this risk.

What is even more interesting is that the liquidity gap between Bitcoin and Ethereum is widening. If funds continue to flow from BTC to ETH, the environment for altcoins to outperform Bitcoin in the fourth quarter may mature. If this trend solidifies, it may be the first strong signal that the current rise in Bitcoin is only a "bull market trap."

Why is Ethereum's liquidity strong?

Unlike Bitcoin, Ethereum's liquidity does not stem solely from speculative demand. stablecoins, tokenized assets, and decentralized finance (DeFi) applications create additional use scenarios and needs for ETH on the Ethereum network.

One notable example is the growth in the supply of euro-denominated stablecoins. In the past three years, the total supply of euro stablecoins issued on the Ethereum blockchain has increased by 347.3% to US$848.1 million. 69.4% of this supply is on the Ethereum network, which means that Ethereum has more than twice the liquidity of stablecoins than all other blockchains combined.

In addition, the size of stablecoins on Robinhood Chain exceeded US$1 billion, further confirming the strong demand for liquidity in the chain.

What does Ethereum pledge record mean?

Another indicator of Ethereum's capital flow is reflected in pledge. The number of ETH pledged on the Internet has reached a record high. A total of 42.95 million ETH (worth approximately US$105.96 billion) have been pledged through the verifier node, accounting for 35.21% of the total ETH supply.

Combined with the increase in stablecoin liquidity and the new high pledge data, capital is increasingly deeply bound into the Ethereum ecosystem. This is not only a demand driven by traders, but long-term investors have also locked a large amount of ETH into the network, thus increasing the stickiness of the ecosystem.

Can the ETH/BTC ratio send a signal to altcoins?

The increase in Ethereum liquidity may be one of the important factors explaining the rise in the ETH/BTC ratio. On Bitcoin, weak spot demand and concerns of a bull market trap dominate, while Ethereum benefits from stronger liquidity and capital inflows.

If this divergence continues, the ETH/BTC ratio is expected to gain the momentum needed to break through the 0.031 level. This trend is not only of great significance to Ethereum, but may also have an important impact on the entire altcoin market. If there is a permanent transfer of capital from Bitcoin to Ethereum, this liquidity spillover effect could benefit the broader altcoin market. If Bitcoin's liquidity share continues to decline relative to Ethereum, a key catalyst for altcoins to outperform Bitcoin in the fourth quarter may be formed.

The content of this article does not constitute any investment advice. There are high risks in the market, please conduct independent research before making an investment decision.